Genmab's (GNMSF) CEO Jan van de Winkel on Q4 2015 Results - Earnings Call Transcript

| About: Genmab A/S (GNMSF)

Genmab A/S (OTC:GNMSF) Q4 2015 Earnings Conference Call February 17, 2016 12:00 PM ET

Executives

Jan van de Winkel - President and Chief Executive Officer

David Eatwell - Executive Vice President and Chief Financial Officer

Analysts

Michael Novod - Nordea Markets

Sarah Potter - Deutsche Bank

Sachin Jain - Bank of America/Merrill Lynch

Thomas Bowers - Danske Bank

Carsten Lønborg Madsen - Skandinaviska Enskilda Banken AB

Peter Welford - Jefferies International Ltd.

Operator

Good day and welcome to the Annual Report 2015 Conference Call. Today’s conference is being recorded.

During this telephone conference, you may be presented with forward-looking statements that include words such as believes, anticipates, plans, or expects. Actual results may differ materially, for example as a result of delayed or unsuccessful development projects. Genmab is not under obligation to update statements regarding the future, nor to confirm such statements in relation to actual results unless this is required by law.

At this time, I would like to turn the conference over to Mr. Jan van de Winkel, CEO. Please go ahead.

Jan van de Winkel

Hello and welcome to the Genmab conference call to discuss the company’s financial results for the year ended December 31, 2015. Joining me on today’s call is David Eatwell, our CFO.

Let’s move to Slide 2. As already said, we will be making forward-looking statements, so please keep that in mind as we go through this call.

Let’s move to Slide 3. 2015 was a transformational year for Genmab, in which we continued to make significant progress with our business objectives. But more importantly, with the approval of DARZALEX in multiple myeloma, we were able to play a role in improving the treatment of cancer. During our last quarterly investor call, we were all eagerly awaiting to hear from the FDA on the regulatory application for daratumumab.

Needless to say, we were extremely pleased to receive the approval on November 16, 2015, more than three months ahead of schedule. Daratumumab, now marketed under the brand name DARZALEX was approved in the U.S. for the treatment of patients with multiple myeloma, who have received at least three prior lines of therapy, including a proteasome inhibitor and immunomodulatory agent or who are double-refractory to a PI and an IMiD.

DARZALEX is the first monoclonal antibody ever approved for the treatment of multiple myeloma as well as the first CD38 antibody to be approved.

After the approval, our licensing partner Janssen was quick to launch DARZALEX and the first commercial sale in the U.S. to place just three days later, triggering a $45 million milestone payment from Janssen to Genmab. We are now waiting to hear from the European CHMP about a potential recommendation for approval of DARZALEX in Europe.

Throughout 2015, the daratumumab development program continued to rapidly progress with enrollment now completed in two of the five ongoing Phase III studies. We received a total of $85 million in milestone from Janssen, for robust progress made in the daratumumab during the year. As you know, DARZALEX is the second antibody created by Genmab to receive FDA approval. The first one was, of course, Arzerra.

In 2015, regulatory submissions for Arzerra, as maintenance treatment for relapsed CLO in the U.S. and Europe were submitted Novartis. U.S. submission was granted Priority Review and Arzerra was subsequently approved for extended treatment of patients, who are in complete or partial response after at least two lines of therapy for Recurrent or Progressive CLO in January this year.

A decision from the European regulatory authorities is also expected for this year. Last year, we furthermore reported positive data from the study of ofatumumab in combination with fludarabine and cyclophosphamide or FC and with relapsed CLO. And as discussed last quarter, we expect Novartis to submit regulatory applications for this indication in the coming months.

Our progress during 2015, with DARZALEX and Arzerra was rounded out with achievements related to our earlier stage pipeline and our technologies.

In June last year, we reported encouraging preliminary Phase I/II data for HuMax Tissue Factor ADC, which is now been assigned the INN name, tisotumab vedotin. We chose a therapeutic dose and expanded the initial clinical study with more patients. We also started the second study in solid tumors investigating a more intense dosing frequency. Both studies are actively recruiting cancer patients at the moment.

Progress in our DuoBody technology collaborations was very substantial in 2015. We announced three new commercial collaborations with Novo Nordisk, BioNovion, which was later acquired by Aduro Biotech and BioNTech.

We earned a total of $17.5 million in milestone payments from our DuoBody technology collaborations during the year, including $1.25 million for progress in our collaboration with Novo Nordisk, and $16.25 million from Janssen. One of the DuoBody programs and our collaboration with Janssen called JNJ-61186372, or 372 in short, is now being studied in a Phase I clinical trial in non-small cell lung cancer. This is the first bispecific antibody developed under our DuoBody technology to enter clinical development.

Finally, as David will discuss in detail, our financial results for 2015 significantly exceeded expectations, as we have firmly improved the operating profit for 2015 by DKK 465 million or by 175% as compared to 2014.

I will now hand the call over to David to further discuss the financial results for 2015 and to give you the guidance for 2016. David?

David Eatwell

Thank you very much, Jan. Let’s start by looking at the income statement for the period ended December 31 2015 and move on to Slide 4.

Revenue for the year came in at just over DKK 1.1 billion, that’s an increase of DKK 283 million or 33% compared to 2014. The increase was mainly driven by higher revenue related to our daratumumab and DuoBody collaborations with Janssen.

Expenses came in a little lower at DKK 579 million for 2015 compared to DKK 585 million in 2014. The expenses will increase though for 2016, as we continue to invest in the clinical pipeline and accelerate the pre-clinical projects, and I will discuss these more in coming slides.

Next on this chart, you can see the DKK 176 million of other income. It’s related to the one-time reversal of the ofatumumab deferred funding liability as a result of the transfer of the ofatumumab collaboration from GSK to Novartis.

Moving to the operating result, in 2015, we had our highest ever operating income of DKK 730 million compared to DKK 265 million in 2014. The increase of DKK 465 million was driven by the reversal of the ofatumumab liability I just mentioned and the higher milestone revenue from our collaborations.

The operating result was slightly higher than predicted, when we updated our 2015 financial guidance in November. This is a result of the achievement of several additional DuoBody milestones and the first royalties for DARZALEX towards the very end of the year.

The net financial items and tax was similar year to year with a positive DKK 34 million in 2015 compared to DKK 36 million in 2014. And that takes us to the net result which was also a record DKK 764 million in 2015 compared to DKK 301 million in the prior year.

Finally on this slide, our cash position increased by DKK 832 million during the year, that was due to proceeds from warrant exercises as well as the positive income from operations. This resulted in a cash position at the end of the year at DKK 3.5 billion. The cash position exceeded the November guidance due to the early payment of the $45 million U.S. milestone for the first commercial sale of DARZALEX in the U.S. You’ll recall, we expected that to be paid in January 2016.

Now, let’s move on to Slide 5. This slide shows the breakdown of revenue by category. In 2015, the milestone income is again the largest portion of the revenues at DKK 706 million. This includes DKK 587 million in milestones from our Daratumumab collaboration and a DKK 110 million related to the DuoBody collaboration with Janssen.

In 2014, milestones were DKK 315 million and milestones from DuoBody collaboration with Janssen was DKK 71 million. As previously discussed, the milestones will be lumpy quarter to quarter and year to year. Deferred revenue from our partnerships with GSK, Novartis, Novo and Janssen was DKK 292 million. But as previously mentioned this will decrease in 2016, as the ofatumumab deferred revenue was fully amortized at the end of 2015.

At DKK 76 million the Arzerra royalty was DKK 25 million lower in 2015 compared to 2014. Sales of Arzerra continued to be negatively impacted by increased competition in the CLL market. However, new for 2015 are royalties from DARZALEX which was DKK 16 million. The cost reimbursements to Genmab were lower in 2015 as Janssen is now responsible for all of the new daratumumab studies.

The graph on the right bridges the revenue between the two periods, and as mentioned, the change is mostly due to the growth in the daratumumab and DuoBody milestones, with DARZALEX royalties partially offsetting the lower Arzerra royalties.

Next, if we look at the expenses on Slide 6, the graph on the left shows the change in expenses. And as you can see, there was a slight reduction in the operating expenses and this was mainly due to lower development expenses for ofatumumab related to the transfer of ofatumumab to Novartis and our successful renegotiation of the deal terms.

However the ofatumumab savings were reinvested in strengthening our pipeline, including Tissue Factor-ADC and AXL-ADC. We also had new projects last year following deals with Aduro Biotech - sorry, Aduro Biotech Europe, BioNTech and the acquisitions of the DR5 and CD19 antibodies, so similar expenses between the two years but quite a difference on where we were investing and an acceleration of the investment in our own pipeline.

Looking at the chart on the right, you can see a significant increase in the operating income to DKK 730 million, mainly due to the significantly higher revenue as well as the reversal of the GSK liability. 2015 marks our third consecutive year with a positive operating result.

Now let’s move on to 2016 and the guidance. On Slide 7, we show an overview of our guidance for 2016 compared to the actual result for 2015. And as I indicated during our Q3 earnings call, there will be quite a few changes for 2016. The revenue for 2016 is expected to be in the range of DKK 825 million to DKK 875 million. The projected revenue primarily includes daratumumab milestones of DKK 400 million and that’s lower than the DKK 587 million reported in 2015.

We also include DARZALEX royalties of somewhere between DKK 200 million and DKK 250 million. The projected DARZALEX royalties are based on Genmab’s estimate of sales between $250 million and $300 million. It’s of course very difficult at this early stage to predict what the DARZALEX sales will be. However, comparing with launch year sales for Kyprolis and Pomalyst, and reviewing the limited sales data we’ve seen so far, we believe these sales estimates are highly realistic.

The remaining revenue for 2016 consists of Arzerra royalties, DuoBody milestones and non-cash amortization of deferred revenue. Of course, you’ll note that the anticipated revenue for 2016 is lower than 2015. This is primarily due to the timing of the daratumumab milestones and a reduction of over DKK 200 million in deferred revenues.

As the ofatumumab deferred revenue from the Novartis GSK collaboration was fully amortized at the end of 2015. So the deferred revenue drops from DKK 292 million in 2015 to slightly less than DKK 90 million in 2016. However, despite the lower revenue in 2016, we believe the quality of the revenue is improving. While milestoning is still the largest portion of our revenues, with the launch of DARZALEX we are seeing a higher proportion of the revenue coming from royalty income. And that’s offsetting the lower quality non-cash deferred revenue.

As you know, we need the majority of our revenue to come from royalties that we can predict to achieve our goal of sustainable profitability. And while of course it’s a little early to start thinking about 2017, if the daratumumab combination trials readout successfully this year and we get expanded labels in 2017, we’d hope to see a number of very sizeable daratumumab milestones as well as increased DARZALEX royalties.

Now moving on to Slide 8 and the operating expenses for 2016, we project operating expenses for the New Year to be in the range of DKK 775 million to DKK 825 million compared to DKK 579 million in 2015. The increase in operating expenses is driven by additional investment in our product pipeline including Tissue Factor-ADC, AXL-ADC, the newly announced HexaBody DR5/DR5 and DuoBody CD3-CD20.

These four key projects account for around a DKK 160 million of the year-over-year increase. With a total in 2016, and the spend of about DKK 260 million on these four projects, that would be about one-third of our total expense base. We’re also increasing the investment in our preclinical pipeline to drive even more projects into the clinic in future years.

We expect 2016 operating income to be approximately DKK 25 million to DKK 75 million compared to the DKK 730 million reported in 2015. The reduction in operating income is due to the decrease in deferred revenue, the timing of milestones and increased investment in progressing our pipeline. The operating income for 2015, of course, also benefited from the one-time gain on the reversal of the GSK Novartis liability of DKK 176 million.

We project the cash position between DKK 3.3 billion and DKK 3.4 billion at the end of 2016 compared to the DKK 3.5 billion at the end of last year. So we remain very well capitalized. Also note, as usual the 2016 guidance does not include any new potential deals or potential proceeds from future warrant exercises.

In summary, a record year in 2015 and increasing royalties from DARZALEX in 2016 enabling Genmab to increase the investment to selectively advance our pipeline and create even more value. Now back to Jan to discuss our 2016 goals. Jan?

Jan van de Winkel

Thank you, David. Let’s move to Slide 9. Looking at our goals for 2016 we have some very busy months ahead. We expect to see significant progress in the daratumumab program with Janssen, with commercial launches in the U.S. and other approved territories. And we very much look forward to a decision from the EU CHMP on the regulatory application for daratumumab monotherapy in relapsed and refractory multiple myeloma.

We expect to report interim efficacy data from two large Phase III studies of daratumumab in the relapsed refractory multiple myeloma settings in the first-half of this year. And if the data is positive, we expect Janssen to subsequently file for a label in these settings.

We also expect Janssen to start multiple new clinical trials in multiple myeloma and other cancer indications, and to report the first clinical data in non-Hodgkin Lymphoma. For ofatumumab, we expect our partner Novartis to start Phase III clinical studies with subcu formulation of ofatumumab in relapsing-remitting multiple sclerosis in the second-half of 2016.

The U.S. FDA approved the use of Arzerra as extended treatment for recurrent and progressive CLL in January 2016 and we anticipate a new regulatory filing for ofatumumab in relapsed CLO this year.

Finally, we expect to have brought interim results from a Phase III study of ofatumumab in refractory follicular lymphoma during this year. We will continue to strengthen the rest of our pipeline as well. And plan to report additional data from the first Phase I/II study of tisotumab vedotin in the second half of this year, and to file an IND for and start the first clinical trial of HuMax-AXL-ADC in 2016.

We will work to progress the HexaBody DR5/DR5 and DuoBody CD3 times CD20 programs, as well as other preclinical DuoBody, HexaBody and ADC programs this year. We will continue to execute partnership agreements for next-generation antibody technologies and expect to see our partnerships progress with new IND filings.

Lastly, we will maintain our disciplined financial management and will selectively invest to progress and broaden our state-of-the-art differentiated product pipeline.

Let’s move to Slide 10. That ends our presentation of Genmab’s 2015 financial results. Operator, please open the call for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] We will take our first question from Michael Novod from Nordea. Please go ahead.

Michael Novod

Hello, it’s Michael Novod from Nordea in Copenhagen. I have a few questions. Firstly, if you take the costs, if you look at the 2016 guidance, could you also elaborate on how you envision, say, the cost levels develop over the next two, three years? It would be very helpful to us.

And then, secondly, on DARZALEX, congratulations on a very, very, solid start. Could you just repeat what you said around the additional milestones related to label expansions? Are you going to see those big milestones attached to label expansion or to the actual filings for label expansion?

And then, lastly on Arzerra, could you try to give us a bit of light on how you actually see the sales decline also into 2016? I’m not really sure that you’re going to see competitive pressure easing. So what do you assume for Arzerra in the coming one or two years. Thank you very much.

Jan van de Winkel

Okay. Thank you, Michael, for the three questions. I will definitely give the questions one and three to David. Let me give you some further color on DARZALEX. What we have put in our current guidance, Michael, is the filing milestones for the - for both of the Phase IIIs reading out in the first-half of this year and the refractory setting without VELCADE or REVLIMID.

But the big milestones, the very - David called them, very sizable milestones, which we could potentially hit this, of course, for the - basically, to get the labels for these very important very large broadenings of the label. And they will likely fall into 2017. So we expect some very sizable new milestones for those programs next year, Michael.

Michael Novod

Right. Thank you.

Jan van de Winkel

So why don’t we give questions one and three to David. David, for the 2016 guidance and the cost levels, what are you’ve been willing to say to Michael over the next two to three years?

David Eatwell

So, yes, just on the daratumumab milestones for 2016, as Jan said, we’ve got the filings, assuming the trials come out successfully with the combos with both Velcade and Revlimid. We also hope we got to look forward in 2016 for the EU approval and the first commercial sale as well.

In terms of the costs overall, you’re quite correct, we’ve got quite an increasing costs in 2016. As I said, those four key programs that we now got ongoing is about DKK 260 million this year. The largest one out of those four is Tissue Factor-ADC, which is no surprise as we’re now running two clinical trials.

Predicting where we go in the future in that, one of the things with Tissue Factor-ADC is going to be whether Seattle at the end of the Phase I data opt-in or not. Because if they opt-in, then we will be sharing the costs on a 50-50 basis. And until that opt-in happens, I can’t really predict whether that cost will continually increase for us or whether we will be sharing it with Seattle.

In terms of the other programs there, that means there is another DKK 140 million being spent in 2016 on AXL, DR5 and CD3-CD20. It’s really going to be depend on the advancement of those particular projects. If they’re successful, then we’ll be spending more. Is it likely with a biotech company in every project that we push through to the clinical going to be successful? Probably not likely.

So difficult to project, but I would say, look, if we’re spending money there, then it means those projects are advancing and that’s going to be positive for the company as we’ll be creating more value for those projects.

When you look at it overall, DKK 260 million on four key development projects, convert that to current dollar rate, it’s under DKK 40 million to advancing four projects, which we got either 800% or a very large proportion of ownership then. So I think it’s still good value for us as we go forward, but difficult to project at this early stage exactly where that expense will go as we move forward into 2017, 2018 and beyond.

In terms of the third question on Arzerra, as you know, I said earlier that the royalties were DKK 76 million in 2015. We did see, as we went through our quarterly results that those numbers were actually getting slightly smaller quarter-by-quarter and we have assumed for 2016 that the sort of the run rate that we are getting in the latter part of 2015 will be the run rate going forward into 2016. So we are not projecting any large growth in Arzerra royalties as they come through.

So I’m not going to take the key headlines, when you compare the interest in the royalty income stream for DARZALEX to be sure. Hopefully, that somehow answers to your questions.

Michael Novod

Okay. Great - just on the costs, I’m not criticizing the development in costs, I think it’s great to invest in pipeline. It was just more to get some kind of a feeling for how we should try to model the operational cost in the next couple of years. And just try to give us some more color on that.

David Eatwell

Yes, understood. It’s difficult for me to project. And as I said, would Seattle opt-in or not opt-in, then of course my largest development costs are $120 million. The Tissue Factor could be halved. Some of the costs as well, if you look at things life DR5/DR5 HexaBody, in 2016 in CD3-CD20, they are quite expensive years for it, because you are getting into the top studies into CMC batches, which can be quite expensive.

So in fact, we will be spending more on DR5/DR5 in 2016 than we will be spending on AXL-ADC, because the CMC is already in for AXL in 2015. So if Seattle opt-in, then it won’t be a massive increase in the expense space. But it will be very clearly identified to development projects. So when looking - I like to look it at, that we are increasing the expenses, we are increasing the investment.

Operator

We will now take our next question from Sarah Potter from Deutsche Bank. Please go ahead.

Sarah Potter

Hi there, it’s Sarah Potter from Deutsche Bank. Just a couple of questions, please. Firstly on your $250 million to $300 million DARZALEX sales guidance, could you just confirm, does this assume you said only as per the label in 2016, or were assuming some off-label usage as well, and in which regions?

Then, just some anecdotal feedback on the launch, if you have any - are there any kind of feedback on the induction-side reaction within the real-world setting or perhaps how the drug is being used compared with Empliciti?

And then, just a final question, maybe provide us an update on the subcutaneous formulation of DARZALEX. I think, as you said safety data committee would take a look and maybe add in further cohorts at the end of January, has this happened? Thank you.

Jan van de Winkel

Hello, Sarah. The DARZALEX estimate for this year was very difficult to make actually. What we did is we looked at Kyprolis and Pomalyst, which actually have a slightly broader label as you and I know, and the first year sales data. What I can tell you is of following the IMS data. And what we have seen is a very robust pick up in January. Basically, week by week increases in sales and we also have very solid feedback from our partner Janssen on the reception by market and the underlying market demand.

So we are highly comfortable with guiding you towards these sales numbers. We want to see actually a number of quarters, Sarah, to actually give you better estimates, because we’ve heard that it’s very difficult with a new drug, where you have not seen like two or three solid quarters of sales. And we have not even finished the first full quarter of sale with DARZALEX.

But we are very confident that the drug is used and it’s used a lot actually. And I cannot comment on label those as off-label. That is not gone into the guidance David and I’ve given you today.

But we also hear back from the market is that the injection side, in fusion reaction side, absolutely no issue. It only happened the first time and they are very mild and they disappeared in most of the patients at the second infusion. So that is absolutely no impact on the use of the drug in the clinic as we see it right now.

And I think Empliciti is a very different drug. We don’t think this any competitor actually to DARZALEX, but time will have to tell us in this coming months, Sarah, how this pans out between the two drugs. But we feel that we’re definitely working with a more efficacious more interesting drug. But let see whether that is going to be proved by reality.

Then the subcu question is a very good one. I can tell you that we have gone out through the first cohort evaluation and that came out very, very positively, even though in the second cohort with the subcu formulation. So that study is progressing very, very well, and at this moment just performing exactly as we could have wished in our best dreams. And I cannot add anything further there.

Sarah Potter

Right. Thank you very much.

Jan van de Winkel

Thank you, Sarah.

Operator

We will now take our next question from Sachin Jain from Bank of America/Merrill Lynch. Please go ahead.

Sachin Jain

Hi. Thanks very much. Just a couple of questions, please. First in the fourth quarter DARZALEX number with DKK 20 million just about, was there any meaningful inventory in there? And then, secondly, just following on from the last question, just to clarify, Jan, your answer, I think you talked at ASH about the Pomalyst data, although not being label-enabling could potentially be used in guidelines.

Just so to clarify is that reflected in guidance. And then secondly, when Pollux and Castor data come, just to reconfirm then their off-label usage potential post-data isn’t reflected in the guidance. Thank you.

Jan van de Winkel

Hello, Sachin. Let me first start with the fourth quarter data for DARZALEX. I mean, there is probably some inventory accumulation in there, but we have not gotten that much detail from Janssen. We just got the final number of DKK 19.7 million. What we are doing is we’re following the IMS database very, very carefully. What I said already in my answer to Sarah is that actually we see robustly week-by-week increases now from the levels we have seen last year.

So, yes, I think it may be some switching from the names - patient program to the treatment on label and there may also be some inventory in some of the providers of the drug. But we don’t have that detail at this moment. But I said to my - in my answer to the former analyst, I already want to repeat, Sachin. I think we want to see a few quarters of sales before we’re going to give you much more detailed estimates and guidance.

And that also answers your second question on the Pomalyst data, which was stunning data as reported at ASH. It’s now being prepared for publication in one of the top medical journals I can tell you. And that was still a mature data that has not gone to the consideration of the guidance we’ve given you today up to $300 million for this year.

And neither has the - let’s hope, the assumed positive data on the Phase III studies, Pollux and Castor, gone into that guidance, that is all potential further upside to the numbers during this year, Sachin. What we have put into the guidance is the milestones for filing in Europe and in the U.S. for both Castor and Pollux assuming, of course, positive data in the interims in the first-half of this year.

Sachin Jain

Can I just take a couple of follow-ons? I don’t know whether you’d be willing to share this, but would you give any color on the degree of inflection in January relative to the numbers we’ve seen? And then related, I mean, as you look at the fourth quarter number versus your guidance, the bottom-end of guidance is essentially the last six weeks annualized, which doesn’t really assume an inflection, is that fair?

Jan van de Winkel

I don’t think we want to give a lot of further information, because the actual Janssen sales numbers may actually in the future differ from the IMS data, Sachin. But what I can tell you that we have seen very solid more than mid-single-digit growth in several weeks in January. And we don’t know whether that will be a trend, because there’s too few data to actually comment on a lot of detail.

Give us a few quarters of sales and then we can give you much more precise guidance on the numbers. And the same holds for the bottom number. I think it’s actually pointing very much towards the high-end of that guidance already at this time.

Sachin Jain

Very clear. Thank you very much.

Jan van de Winkel

Okay. Thank you, Sachin.

Operator

We will now take our next question from Thomas Bowers from Danske Bank. Please go ahead.

Thomas Bowers

Yes, thank you. Just a few follow-ups here, on the milestone guidance I’m just wondering if you would put a little more color on the possible upsides to the current guidance. It’s primarily reflected to Arzerra, I believe they just still have around $100 million U.S. remaining in the FL indication. And since that you are expecting interim data this year, so what could potentially upside be there, whether you have included some of that in the current guidance?

And then my second question, just on ofatumumab and in order to differentiate against eculizumab, I am just wondering, if you see this as primarily as to - on the commercial side, I mean, the subcu versus IV or do you believe that there - we have seen the fatal events in lupus and arthritis, I mean, could that potentially still remain a concern, that could differentiate ofatumumab to eculizumab in order for you to catch up in MS.

And then finally, just on ASCO, I am just wondering how many abstracts have been submitted. And then maybe, if you could, add some color on in general and also maybe in regards to EHA in June? Thank you.

Jan van de Winkel

Thanks, Thomas, for the questions. I will leave the possible upside on the milestones to David. But let me started the second question ofatumumab, the subcu formulation. Novartis has already indicated that they will start different large Phase III trials in relapsing-remitting MS with subcu ofa. And we think it’s truly differentiated from everything we know up to this time from eculizumab, which is a very old primitive antibody, actually not even generated by rose that by Roche but by Genentech.

And what we think is that antibody had real toxicity as you already said with the infectious disease level, which we haven’t seen that ofatumumab - ofatumumab subcu, so that means that you need far lower doses, which is commercially, of course, attractive and also much more convenient to the patients. Plus, if you stop with the dosing, Thomas, you can also actually get rid of the drug very quickly, which is not possible with the IV drug.

For example, if you imagine a woman who wants to become pregnant, it’s actually much more convenient. And a lot of ladies are unfortunately getting relapsing-remitting MS. This would be a much more effective and convenient drug to take from that perspective. So we think there is a number of medical and commercial reasons to really pursue aggressively ofatumumab subcu. And Novartis is exactly going to do that in thousands of patients as of mid this year. And further plans need to come from Novartis. But we clearly feel that there is a very clear differentiation between the two drugs.

Then ASCO, we are still collecting an overview of all the abstracts submitted, then data submitted, but there’ll probably be some further incremental data of some of the data studies at ASCO. At EHA, we have not yet, I think, fully made up our mind to what will be submitted to EHA. And, of course, needless to say, what is a possibility for both of these conferences as well as for ASH end of this year.

If we would get the Pollux and Castor data before that, that would clearly be connected, Thomas, to be submitted to one of these three conferences. It is too early to say at this time. We will get back with more full news on the ASCO abstracts. We don’t have the complete overview ourselves at this time.

And then, David, maybe question around the guidance on the potential upside on the milestones.

David Eatwell

Yes. Now, thank you, Thomas. We haven’t included any milestones for Arzerra and the FL indication in the 2016 guidance. Remember, actually those milestones are in Danish Krone. So with the current strong dollar it’s actually about DKK 80 million now in deferred milestones. But the largest portion of the milestones was actually based on approval. So you wouldn’t expect that even if we get the positive results and get filing, you wouldn’t anticipate approval in 2016, so then it would be spread over a couple of fiscal years as well. So we have not included any FL milestones in 2016.

Thomas Bowers

Okay. Great. Thank you.

Jan van de Winkel

Thanks.

David Eatwell

Thank you.

Operator

We will now take our next question from Carsten Madsen from SEB. Please go ahead.

Carsten Lønborg Madsen

Hi, everybody. Thanks a lot. This is Carsten from SEB. Just, Jan, when you look at the Pollux and Castor data we will see later this year, would you care explain a little about which type of threshold will you need to meet in order to have a very strong growth in the relapsed-refractory setting?

And you can feel free to talk about overall response rates or complete response. What would you benchmark against the sort of best level that you should do better than?

And then, also on the Seattle Genetics collaboration on tisotumab, at what point in time, I know it’s at end of Phase I, but will be - next year they will be making the decision? Thanks.

Jan van de Winkel

Hello, Carsten. These are both very good questions. Unfortunately, I cannot give you a lot more guidance on Pollux and Castor. We have of course gotten already a pre-agreed threshold level, which we need to go over this peer versus the primary. And quite also the interim, we need to see a certain percentage increase, Carsten, over the control arm. This is either Rev/Dex by itself or VelDex by itself.

But what you can do for your owner perspective is just look at some other interims in multiple myeloma with some other recently approved drugs based on interims. You need to see a pretty significant increase at the interim in DFS over the control arm in order for the regulators to consider it enough for filing, and that also be much in line to what has been seen in other interim analysis recently as a requirement in multiple myeloma in the second line.

I cannot give you further clarity, because that would not be good I think here.

Then for Sea-Gen for tisotumab vedotin that could actually be this year assuming that we get more data in the second-half of this year this is what we fully believe, Carsten, based on the current very active recruitment and the dosing with an optimal dose of the drug in the Phase I/II study. And also in the more frequent induction of - infusion of the drug in the second study, we believe that actually the trigger points for Seattle could actually forward in this year.

Carsten Lønborg Madsen

Just a quick follow-up through the interim data, but you said, Europe or not address [ph] or is it fair to say that you’re very confident in the interim data being strong enough for filing.

Jan van de Winkel

I mean, we have put in the filing milestones for both Castor and Pollux and you have seen - as we have seen, of course, the very impressive Rev/Dex DARA data in the 32 patients at ASH. I mean that is basically blow you out of the room type data. This is after two lines of prior treatment, Carsten. And then, of course, the requirements for the Phase IIIs are after one round of prior treatment. So they are less, say, usually cancer patients, and so less heavily pre-treated, usually respond even better to drugs.

So, yes, we are very confident and we believe that that may actually be a very strong driver of growth for DARZALEX royalties in 2017, as David has already indicated in the introduction. And of course, also we have some very sizeable milestones assuming that the label will be expanded for this very robust second-line settings with these two combination regimen.

So, yes, we are quite optimistic about it, Carsten, let’s hope that we prove to be right and then you will also get optimistic.

Carsten Lønborg Madsen

Thanks a lot.

Jan van de Winkel

Thank you.

Operator

[Operator Instructions] We now have our next question from Peter Welford from Jefferies. Please go ahead.

Peter Welford

Hi, yes, thanks for taking my questions. Just firstly to go back to the spending on the pipeline drugs, I wonder if you could just sort of talk about if there is an upper level, I guess, of spending longer-term that you would feel uncomfortable with perhaps and also would want to consider out-licensing. I guess, I’m just sort of returning to a prior question, and trying to get some sort of steer as to perhaps where - what sort of growth in spend most of objective you aim for, or what happens to, given more outcome happen to the DARZALEX royalties in the future, where you would perhaps be happy to see spend going?

And then, secondly in similar vein, given you sort of now entering immuno-oncology, but given obviously the need to often run combination studies in those indications, how are you approaching that? Are you willing to give your antibodies at this stage to other companies to do studies? Would you be willing to do that, and you want to retain the rights and prefer to do sort of in-house or perhaps even bring in other drugs that you could then test in combination with your own.

And finally, just coming back to the Arzerra milestones question on the financials, I just really you give - I think there is $80 million less for Arzerra. I just wanted to understand, is that all regulatory and clinical-based for Arzerra, in follicular lymphoma? Am I right in saying the sales milestones on top of that as well, or does that $80 million into the sales as well? Thank you.

Jan van de Winkel

Thank you, Peter, for the questions, so several questions for David. But why don’t I actually give you first some color and then give David time to think about question one? And the pipeline of drugs, we have an amazing pipeline, Peter. We have like over 10 IND candidates for the next four years; you know three, AXL, DR5/DR5 and CD3- CD20, which we have named.

And we said we are confident that we can at least push one IND a year - one IND a year into the clinic in the next four years and then it will accelerate and accelerate actually quite quickly.

And the acceleration phase on 2018, starting on 2018 and 2019, will actually involve also the immuno-oncology candidates, it’s a bispecific candidates out of the BioNovion, are now called Aduro Europe collaboration and the BioNTech. And actually, we have actually more than half of our programs are now immuno-oncology programs, Peter.

So we actually expect a very swift acceleration of the number of candidates going into the clinic. I will let, David, comment on the ceiling of spend. But what I can tell you, the whole strategy of the company from here on is to identify the next clear winner. It should be a truly differentiated drug candidate. Once we identify that, we will maximize the potential.

We try to do that by ourselves or with a partner, for example, it could be tisotumab vedotin, this likely going to be Seattle Genetics.

And, yes, then we can either, when we have some supply [ph] programs, because it has a ceiling, of course, in spend. We can either put them on the shelves, because some of these future programs will fail, Peter, we will not all be winner, because some of them are so potent that they may actually be toxic to patients. And then, we can immediately replace a stop program by a program from the shelf. Or more likely, as you already alluded to, we can potentially partner with a pharma - with a biotech company to let them also take the risk and spend money on it, that from here on you will see acceleration.

I will let David respond to the question on the ceiling, how we see that given our own internal guidance projections for the coming years.

Then with regard to combination therapy, yes, there are so many possible combinations like DARZALEX, will be combined to checkpoint blockers. And also hopefully within this year, in different cancers together with Janssen, and of course, DARZALEX is now very much driven - the development is very much driven by Janssen.

For the same token, we have actually over half of our preclinical programs are now immuno-oncology programs, all of them are bispecifics as speak, Peter. But even they could potentially be combined with like other cancer vaccine, so with other small molecule immuno-oncology drugs, with sort of very good preclinical data for synergy.

Yes, it’s likely that we would actually do that together with pharma of biotech partners in the future, also in order to optimally use our resources. So that’s probably what I can say at this time. Maybe, David, you can further allude to the spending for the pipeline to, Peter, and also then try to answer the Arzerra milestone question on the follicular lymphoma milestones.

David Eatwell

Sure. With the - I’ll start with easy one. With the Arzerra milestones the $80 million or approximately $80 million referring to on the FL milestones is down to the regulatory approval for the FL indication. There is also some sales milestones or the similar side, but given where the sales value of Arzerra is today that would be somewhat further out, but there are some sales milestones still within the new agreement overall on the oncology side.

Going back to the future spending, I think at this point it would somewhat depend on the pace and success, continue to access clinically for DARZALEX. And I think we’re in a nice situation with the current DARZALEX royalty coming through, and the expectations, the royalties, and big sales over the next three to five years. Then that gives us quite an income stream coming through that we can reinvest in this pipeline to create more value.

So being able to self-fund a large portion of pipeline is quite attractive, because it’s somewhat going to depend on the success of the projects. I mean, if we’re in such a lucky position that three or four of these programs all headed through and all come out with differentiated antibodies, then we’ll be in a fantastic position to really look at it and say hey, this really neat funding, and we’d have to then decide who we do that with a partner, are we going on 50-50. Or perhaps there are some programs that we like more than others, some that will really double down on and push further forward on our own and maybe the ones that aren’t quite so strong, because we look to actually license or partner those out.

So I think we haven’t got any preconceived ideas of exactly how that would develop over time. But again, I think the bigger the spend, the more good news it is for the investors, because it means these projects are advancing and meeting our very high benchmarks and standards to actually take our product through forward. Again, if we get a partner like Sea-Gen to come in, that’s going to half the future investment in Tissue Factor-ADC. But I think we can afford to take some increased spend in 2017, 2018 based on the expectations for DARZALEX.

Peter Welford

That’s great. Thank you very much.

Jan van de Winkel

Thank you.

David Eatwell

Thank you, Peter.

Operator

[Operator Instructions] We have no further questions at this time, sir.

Jan van de Winkel

So, thank you all for calling in today to discuss Genmab’s financial results for the full-year 2015. We look forward to speaking with you again soon.

Operator

That will conclude today’s conference call. Thank you, ladies and gentlemen. You may now disconnect.

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